Abstract
This note considers cartel stability when the cartelized products are vertically differentiated. If market shares are maintained at pre-collusive levels, then the firm with the lowest competitive price-cost margin has the strongest incentive to deviate from the collusive agreement. The lowest-quality supplier has the tightest incentive constraint when the difference in unit production costs is sufficiently small. (C) 2018 Elsevier B.V. All rights reserved.
Original language | English |
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Article number | 174 |
Pages (from-to) | 70-73 |
Number of pages | 4 |
Journal | Economics Letters |
Volume | 174 |
DOIs | |
Publication status | Published - Jan 2019 |
Keywords
- Cartel stability
- Collusion
- Vertical differentiation
- PRICE-COMPETITION